ACCA Strategic Professional · Strategic Business Leader · Managing, monitoring and mitigating risk
Corvane Retail operates 120 stores. Management wants early warning that store-level controls over cash handling are deteriorating, rather than discovering losses after the year-end audit. Which monitoring approach best meets this aim?
Regular reporting of key risk indicators, such as cash variances and void rates, with trigger thresholds is best. It gives timely, forward-looking warning of deteriorating controls, whereas annual audit is retrospective and codes of conduct or insurance do not monitor control performance.
- AKey risk indicators, such as cash variances and void transaction rates, reported to management regularly with trigger thresholdsCorrect
- BA once-a-year external audit of the financial statements
- CA revised code of conduct distributed to store staff
- DIncreased insurance cover against theft
Explanation
Key risk indicators with thresholds give forward-looking, timely signals that control performance is changing. The external audit is retrospective and annual. A code of conduct and insurance are not monitoring tools; insurance only transfers the financial impact.
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